Heartland Daily Podcast: Free Markets Uber Alles?

Convenient transportation has become a staple in today’s society, however, convenience is no longer enough. People need to have access to a ride in real time.

Every transportation service is coming up with apps so customers can track their busses and trains to better plan their trips. Unfortunately, delays and construction still plague the public transportation systems and are still not as reliable as it could be. Difficulty hailing cabs, in addition to their prices, have turned many away from using taxis. Having access to a ride at a moment’s notice is something that had not been perfected. Then, four years ago, Uber came along.

Bret Swanson, president of Entropy Economics LLC, recently joined our Jim Lakely, on The Heartland Daily Podcast to discuss Uber. He explained how Uber taps into the transportation market by offering drivers to people looking for a ride. The app gives customers access to Uber drivers in the area who can come pick up and drive them wherever they need to go.

Uber drivers who are online will show up on maps of customers and Uber will connect you with the closest driver. Riders have the choice of a Uber SUV, sedan, black car, or even regular taxi cab. Unlike with taxis, customers do not need to worry about cash or credit cards because payment is all taken care of through the app. Customers can also request a quote prior to requesting a ride or split their fare with a friend, all through the app. The best part of Uber: its about 50 percent cheaper than taxi cabs.

Uber was launched in San Francisco and in four years, it has expanded to not only 72 cities in the United States, but 39 countries. The company has also become wildly popular with investors, is now valued at $18.2 billion. Last summer, Uber even launched a service to request ice cream trucks in a select number of cities. Despite its popularity, the company is constantly offering discounts and promotions to continue to encourage people not only to get the app but actually use the service. Uber’s approach provides safe, convenient and cheaper options for everyone. However, there is one party that would disaggree: taxi cab drivers.

Taxi drivers all over the country have staged protests against Uber, arguing that their fares should be the same as those of taxis. Though Uber allows customers to request taxis through the app, most opt to select an Uber vehicle instead. Uber’s fares are calculated on a basic supply-and-demand algorithm. The more demand for drivers rises during the day, the more prices go up. Uber surcharges, but not always at rush-hour times like taxi cabs do. Some days you may only have to pay an extra 5 percent during rush hour, but have to pay an extra 25 percent at 2 p.m. The whole system utilizes the free market and weighs the value of each ride by how in demand it is at the time.